“Law of Good”celebrates 10 years conceding benefits to the ICT sector




      

This year the Law of Good (Law No. 11.196/ 05) will celebrate 10 years providing benefits to companies of Information and Communication Technology sector (ICT). Stablished in 2005 by Provisional Measure No. 252, it provides to technological innovation companies great opportunities to reduce their tax costs, considering investments in Research, Development and Innovation (RD&I). In a questions and answers frame, this article aims reviewing few important points of this law and its contributions. See below: 

What is the Law of good?

A: The Law 11.196 / 05, which became known as the “Law of Good “, creates tax incentives to companies that conduct research and technological innovation development. 

How does it work?

A: The law provides tax incentives such that:• Deduction of 20.4 % to 34% in income tax (corporate income tax ) and CSLL (Social Contribution on Net Income ) for expenditure on R & D;• 50% reduction in the IPI in the purchase of machinery and equipment for R & D;• Depreciation and accelerated depreciation of goods (2 times the normal rate) for the purposes of income tax on machinery, equipment, apparatus and instruments for R & D;• Credit withholding tax on royalties paid by technical or scientific received from abroad;• Federal grants for researchers employed by companies (60 % in the NE and NO and 40 % other regions). 

What are the main advantages to profit from tax incentives of the Law of Good?

  • • Ability to reinvest the amounts deducted in Research and Development;
  • • Continuous improvement of products, services and processes;
  • • Increased competitiveness in the market;
  • • Innovation Generation leverages the growth of organizations;
  • • To be considered an innovator by MCTI (Ministry of Science, Technology and Innovation);

Who can benefit?

A: In principle, any business with expenses or investments in Technological Research activities and technological innovation development can use the tax incentives provided by Law No. 11.196 / 05

What sets Research and Development of Technological Innovation activities? What is considered innovation? What are the criteria that companies will have to meet to get the tax incentives of the Law of Good?

A:  Brazilian government create the Law of Good using concepts obtained in the Frascati Manual to define what actually does and is not part of Research and Development. This brings the definition of R & D divided into three groups: 

 

  • Basic or Basic Research: consists of experimental or theoretical work undertaken primarily in order to acquire new knowledge of the fundamentals of observable phenomena and facts, without considering an application or a particular use.·

 

  • Applied research: is the creation of original works with the purpose of acquiring new knowledge; especially directed at a goal or a certain practical purpose.·

 

  • Experimental development: is to do systematic studies based on pre-existing knowledge, obtained through research and / or practical experience, with a view to manufacturing new materials, products or devices, processes, systems and services or considerably improve existing ones.

To sum up: It is considered technological innovation: the “conception of a new product or manufacturing process as well as the addition of new features or characteristics of the product or process involving incremental improvements and effective gain in quality or productivity, resulting in greater competitiveness in the market .”

Which regions, areas, and companies can benefit from the Law ?

A: All regions can benefit from the law, however once the incentive is greater for companies under the taxable income system, and as it depends on certain expertise to take advantage of the law, the largest beneficiaries have been big companies that focus on the state of São Paulo.

Why many companies still do not use the features and benefits from the Law of Good?

A: Many companies still do not know it. The lack of expert advice, that it is still lack of knowledge; is an exclusion factor of benefit. The fear of tax authorities; doubts as to the interpretation of the law and internal management errors are other apparent reasons.

Where can I get more information on this issue?

A: Referring to the law in http://www.planalto.gov.br/ccivil_03/_Ato2004-2006/2005/LEI/L11196.htm  or through expert advice, such ours at Paseli Consultants.

 

We are experts in:


Government Sales

End-to-end solutions, focused on the ICT industry

International Business Development

Sales as a service and initial operation, focused on the aerospace, medical devices, and ICT segments

Connecticut

Representação do Governo de Connecticut no Brasil

Nossas empresas



Testimonials

  • With Paseli, we created in Latin America a pipeline of USD 6 million with 150 qualified leads, with no we need to invest in establishing an office, hiring and training local staff," Mauricio Costa, commercial director of OpenLink in Brazil, global developer of software solutions.

    Maurício Costa

    Commercial director OpenLink in Brazil, global developer of software solutions

  • I am very impressed with the capacity and speed that the consultancy understood our business needs and offered a service proposal in line with our budget.

    Jean Pierre Filion

    Vice president of Global Business XMedius, a leading global provider of enterprise-grade solutions for Secure Document Exchange

  • Paseli volunteered and changed the scope of work and the products that we needed, keeping the quality. All we have received so far exceeded our expectations.

    Nena Lentini

    Director of the CDC Brazil programs CDC Brazil, operating agency of the Department of Health and Human Services of the United States

  • The agenda set up for this visit was impressive. The consultants know the next steps, know what should be taken care of in Brazil and also in Connecticut.

    Jason Giulietti

    Vice president of Business Recruitment Connecticut Economic Resource Center (CERC), the agency that promotes economic development in Connecticut

  • Our intention was to test the market of software factories in São Paulo to learn about companies' needs, so we could concrete our expansion plan. We also wanted to try the model of outsourcing the sales force, thus we chose Paseli to be our sales representative in the region.

    Reno de Brito Pereira

    Director Polisys Computer, recognized software manufacturer in the Midwest

  • My expectation was fully met! The idea was to know the types of support that we would have during the phase of internationalization and business development in Connecticut - and this was very well done during this week of matchmaking organized by Paseli.

    Luiz Tanaka

    Commercial Director Saipher - Air Traffic Control and Management Systems

  • The support given to us by Paseli was very important and the allocated staff was very responsive during all processes.

    José Lima

    Director Sales & Operations Thomson Reuters, multinational with 60,000 employees in more than 100 countries




News

More news

Newsletter

Subscribe with your mail and get our news